Forum Help

If you want to ask about changing your username, have login problems, have password problems or a technical issue please email forumteam@moneysavingexpert.com

Posting help:

If you want to ask why a word can't be typed, your signature's been changed, or a post has been deleted see the Forum Rules. If you don't find the answer you can ask forumteam@moneysavingexpert.com though due to volumes we can't guarantee replies.

I had to file for bankruptcy back in 2003 after a business failure. At the time I included my student loan in the bankruptcy petition.

I believe since this time the laws have been tightened so that it is not possible to write off student loans.

However, many years after forgetting about all this...

I'm currently moving house and there's a problem with my mortgage application due to my credit score. Turns out that in the last week (good timing) Link Financial Outsourcing have registered a default on my credit file for not paying my student loan. The actually default date is 2 years ago.

This is the first I've heard about my student loan since 2003.

Some quick googling reveals that payment cannot be enforced as the loan was pre-1998.

But this is actually not my main concern. My concern is there's now a default on my credit file that'll be hanging round for 6 years whether I pay or not - stopping me from getting a mortgage.

A debt in respect of a student loan (see paragraph 40.92) is not released on discharge where the bankruptcy order was made on or after 1 September 2004.! This is provided for in legislation [note 24] other than the insolvency legislation.

And also

(2)!In England and Wales—
(a)any sum payable to an eligible student by way of a student loan which the eligible student receives or is entitled to receive after the commencement of that person’s bankruptcy, will not be treated as part of the bankrupt’s estate or claimed for the bankrupt’s estate under section 307 or 310 of the Insolvency Act 1986(2), whether the entitlement arises before or after the commencement of the bankruptcy; and
(b)any debt or liability to which that person is or may become subject in respect of any sum payable to an eligible student by way of a student loan will not be included in that person’s bankruptcy debts when the person receives or is entitled to receive that sum–
(i)in the case of a bankruptcy commencing before 1 September 2004, after the commencement of the bankruptcy; or
(ii)in the case of a bankruptcy commencing on or after 1 September 2004, before or after the commencement of the bankruptcy.

I'm no lawyer - but that to me says the student loan liability was discharged with the bankruptcy of 2003.

You don't need to pay a solicitor to help you with this. As you were made bankrupt before 2004 you are correct that your student loan was provable and should have been written off. Your next step is to complain to Link Financial with details of your bankruptcy and a request to remove the default.

It's a good idea to also inform the Insolvency Service office that dealt with your bankruptcy and the Student Loans Company (SLC). If you can't resolve the matter this way you can take your complaint on to the Financial Ombudsman Service (FOS) and the Information Commissioner's Office (ICO). The whole process is free and should get the matter resolved.

Thanks for this. Yes, I figured I could probably do the same myself. The reason for engaging the solicitor is that we're right in the middle of a house purchase - lender wants to see some firm proof that this is an invalid default notice - so solicitor is needed to verify my story in the short term.

Have you told the mortgage lender that the default is invalid because the student loan was included in your bankruptcy? If they are not already aware of the bankruptcy it's probably not something you want to bring up. However, if they do know about it, it's a fact that you can't be held liable for the debt and therefore the default should never have been issued.

I appreciate there is an element of urgency so it will of course be up to you whether to pay the solicitor to help you. It may be worth calling Link Financial to see if it's something that can be quickly resolved directly with them. Although even if they remove the default, your credit file is only updated once per month.

How this site works

We think it's important you understand the strengths and limitations of the site. We're a journalistic website and aim to provide the best MoneySaving guides, tips, tools and techniques, but can't guarantee to be perfect, so do note you use the information at your own risk and we can't accept liability if things go wrong.

This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service.

Do note, while we always aim to give you accurate product info at the point of publication, unfortunately price and terms of products and deals can always be changed by the provider afterwards, so double check first.

We don't as a general policy investigate the solvency of companies mentioned (how likely they are to go bust), but there is a risk any company can struggle and it's rarely made public until it's too late (see the Section 75 guide for protection tips).

We often link to other websites, but we can't be responsible for their content.

Always remember anyone can post on the MSE forums, so it can be very different from our opinion.

MoneySavingExpert.com is part of the MoneySupermarket Group, but is entirely editorially independent. Its stance of putting consumers first is protected and enshrined in the legally-binding MSE Editorial Code.